Walmart, you’ve got to be kidding!

Articles
July 23, 2009

Walmart, you’ve got to be kidding!

How comfortable do you feel if you’re a consumer packaged goods manufacturer with, say, 30% or more of your sales occurring at Walmart? You might feel good if you believe that the world’s largest retailer deserves what it is asking for—a percentage of your consumer advertising and trade promotion budgets that equates to your percentage of sales occurring at the chain. You might feel positive if you believe that Walmart’s in-store digital advertising vehicles, ElevenMoms bloggers, co-branded media ads and website commerce are powerful and refined enough to pay off for your brands. On the other hand, you might be thinking your company is in a vise, you know it, they know it, and now you’re about to pay or risk being de-listed or at least de-emphasized at the shelf. You knew this day could come when you placed so much faith in your relationship with this chain. Now what will you do? What can you do? Other retailers might be wishing for similar incentives to emphasize brands, but they lack Walmart’s clout and can’t strike the same fear in you. “It’s probably the boldest single retailer grab for suppliers’ consumer-marketing funds ever,” wrote Jack Neff in Ad Age.

How comfortable do you feel if you’re a consumer packaged goods manufacturer with, say, 30% or more of your sales occurring at Walmart? 

You might feel good if you believe that the world’s largest retailer deserves what it is asking for—a percentage of your consumer advertising and trade promotion budgets that equates to your percentage of sales occurring at the chain. You might feel positive if you believe that Walmart’s in-store digital advertising vehicles, ElevenMoms bloggers, co-branded media ads and website commerce are powerful and refined enough to pay off for your brands.

On the other hand, you might be thinking your company is in a vise, you know it, they know it, and now you’re about to pay or risk being de-listed or at least de-emphasized at the shelf.

You knew this day could come when you placed so much faith in your relationship with this chain. Now what will you do? What can you do?  Other retailers might be wishing for similar incentives to emphasize brands, but they lack Walmart’s clout and can’t strike the same fear in you.

“It’s probably the boldest single retailer grab for suppliers’ consumer-marketing funds ever,” wrote Jack Neff in Ad Age

In our view at SupermarketGuru.com, we believe it is also possibly the most egregious assault on suppliers, the health of their brands, and the value of their consumer insights and collaborative investments that help build categories at the retailer. No one is an angel in trade partnerships. But if Walmart were to drain CPG budgets, and manufacturers became fiscally restrained from marketing as they saw fit to sustain demand, it would pervert efforts to be consumer-centric and the marketplace shakeup would be ugly.

We see this as an outright money grab that would severely damage much of what is right with brands—innovation in products and packaging, pricing that suits consumer elasticity, and fair competition, to name a few.  This smells of illegality (the Robinson-Patman Act would require any abiding manufacturers to do the same for other retailers) and it smacks of arrogance.

Walmart, in our opinion, feels emboldened to intimidate manufacturers because manufacturers are each on their own. Divide and conquer strategies often work. That’s why we urge the Grocery Manufacturers Association to help unify the manufacturer community against this threat. A strong position by GMA would include counsel’s opinion on the illegal nature of the discounter’s demand, and acknowledgment that Walmart’s ability to make life tough for any single manufacturer is really every manufacturer’s problem because anyone could be next.